Entering the Japanese Market - DiVA portal1229652/FULLTEXT01.pdf · IKEA product catalogue and the...
Transcript of Entering the Japanese Market - DiVA portal1229652/FULLTEXT01.pdf · IKEA product catalogue and the...
Entering the Japanese Market
- Similarities and Differences between
two Swedish firms
Bachelor’s Thesis 15 hp
Department of Business Studies
Uppsala University
Spring Semester of 2016
Date of Submission: 2018-05-25
Robin Moritz
Zaid Jirges
Supervisor: Cecilia Pahlberg
Abstract
In this thesis we investigated the differences and similarities between a big and a small Swedish
firms’ market entry process into Japan. This was done by studying the two chosen companies,
IKEA and Haglöfs respectively. We conducted our research using a case study collecting data
from primary and secondary sources. The primary data was collected by using a semi-structured
interview approach while the secondary data has been collected through searching for relevant
sources. We concluded that the main similarities between IKEA and Haglöfs were the firms’
extensive use of network relationships in the Japanese market, were both utilized employees with
Japanese market knowledge. The main differences, on the other hand, were mainly the
enthusiasm shown from actors, such as governors, consumers and municipalities, that actively
encouraged IKEA’s market entry. The scope of the entries was also different, with the size of the
IKEA product catalogue and the construction of stores requiring more governmental approvals
and lengthy processes. IKEA’s extensive international experience gained from earlier market
entries were also something which set the two entries apart.
Keywords: Network, internationalization, Japan, foreign market entry, Blankenburg, IKEA,
Haglöfs
Acknowledgements
We would like to thank Magnus Nervé for his willingness to help and be interviewed, which
without we would have no thesis at all. We would also like to thank our advisor Cecilia Pahlberg
for invaluable advice during the course of this thesis.
Table of contents
1. Introduction .................................................................................................................................. 1
1.1 Thesis statement: .................................................................................................................... 2
2. Theory .......................................................................................................................................... 3
2.1 Earlier literature review .......................................................................................................... 3
2.2 The Blankenburg model ......................................................................................................... 6
2.2.1 External entry force ......................................................................................................... 7
2.2.2 Internal entry force .......................................................................................................... 8
2.2.3 Application of theory ...................................................................................................... 9
2.2.4 Critique .......................................................................................................................... 10
3. Method ....................................................................................................................................... 11
3.1 Choice of companies ............................................................................................................ 11
3.2 Qualitative study .................................................................................................................. 11
3.3 Case study ............................................................................................................................ 12
3.4 Primary & secondary data .................................................................................................... 12
3.4.1 Primary data .................................................................................................................. 12
3.4.2 Secondary data research ................................................................................................ 14
3.5 Theory operationalization .................................................................................................... 14
4. Empirical review ........................................................................................................................ 16
4.1 Japan ..................................................................................................................................... 16
4.2 IKEA .................................................................................................................................... 16
4.2.1 Entry process ................................................................................................................. 17
4.2.2 IKEA in Japan ............................................................................................................... 18
4.3 Haglöfs ................................................................................................................................. 20
4.3.1 The entry process .......................................................................................................... 21
4.3.2 Haglöfs in Japan ............................................................................................................ 21
5. Analysis ...................................................................................................................................... 23
5.1 External forces: .................................................................................................................... 23
5.1.1 Activeness ..................................................................................................................... 24
5.1.2 Network structure .......................................................................................................... 24
5.1.3 Visibility ........................................................................................................................ 25
5.1.4 Degree of internationalization ....................................................................................... 25
5.1.5 Summarizing external differences ................................................................................. 26
5.2 Internal forces ....................................................................................................................... 26
5.2.1 Network knowledge ...................................................................................................... 26
5.2.2 Ambitions and interest .................................................................................................. 27
5.2.3 Connected relationships ................................................................................................ 27
5.2.4 Network internationalization ......................................................................................... 28
5.2.5 Summarizing internal differences ................................................................................. 28
6. Conclusion .................................................................................................................................. 30
6.1 Summarizing conclusion ...................................................................................................... 30
6.2 Further studies ...................................................................................................................... 31
7. Sources ....................................................................................................................................... 32
7.1 Interviews ............................................................................................................................. 35
Appendix 1 ..................................................................................................................................... 36
English - Question Guidelines .................................................................................................... 36
General Questions .................................................................................................................. 36
Questions regarding the External Entry Force ....................................................................... 37
Questions regarding the Internal Entry Force ........................................................................ 38
Swedish Questions ..................................................................................................................... 39
Generella frågor ...................................................................................................................... 39
Frågor angående externa inträdesfaktorer .............................................................................. 40
Frågor angående interna inträdesfaktorer ............................................................................... 41
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1. Introduction
Japan is the third largest economy in the world and the second biggest retail market (Business
Sweden 2016; JETRO 2015). The Japanese population has a high purchasing power, an educated
population, R&D and manufacturing facilities in world-class quality and among the leading in
business and environment sustainability (Business Sweden 2016). These factors should make
Japan an attractive country for firms. However, the Japanese market is widely seen as one of the
most difficult to enter (Matusitz & Forrester 2009). There have been several examples of firms
who have tried to enter, such as IKEA during the 1970’s, but failed and was eventually forced to
withdraw. A common problem foreign companies face when entering Japan is far too low
investments for the entry to have a chance to succeed. The required investments needed often
makes the Japanese entry a win big, lose big ordeal (Eurotechnology 2013; Japan Today 2016).
For IKEA this reason could be part of their previous failed attempt, as their investment could
have been too low with too small stores during the 70’s (Bloomberg 2006). Vodafone also tried
their luck in the Japanese market, but their low investment failed to bring about a 3G network
until their third attempt, giving lower coverage and quality than the competitors. This lead to a
situation where consumers would decide between an unknown foreign company with lower
coverage and quality than domestic competitors (Eurotechnology 2013). This is also something
Haglöfs, a Swedish outdoor clothing company, experience when they entered Japan as many
brands sells their products through their own physical brand stores (Interview, Nervé 2016). This
resulted in that Haglöfs had a higher investment in the Japanese market, and thus more risks, as
the company had their own stores rather than selling through retailers.
Lack of investment is not the only reason for failure but is seen as a hard factor where the
companies fail. Other reasons that could be attributed is a lack of understanding of the Japanese
market, close business relationships that are formed in a network-like cluster between Japanese
actors, the high costs of doing business as well as the attitude of Japanese customers preferring
Japanese made products (Czinkota & Kotabe 2000; Eurotechnology 2013). Since actors in the
Japanese network are not accounted for, it is predictable that companies who try to penetrate the
Japanese market with a western approach risk failure. Swedish companies that want to establish
themselves in Japan are then largely dependent on being accepted by the actors, such as
customers and suppliers, in the Japanese network relationships. The question then arises what the
differences and similarities are between two Swedish firms that try to enter the land of the rising
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sun. Hence, we decided to study the Swedish international IKEA and the Swedish SME Haglöfs’
market entry process into Japan. Our research question is thus:
What are the similarities and differences between IKEA and Haglöfs’ market entry process into
the Japanese market?
1.1 Thesis statement:
The purpose of this study is to investigate, analyze and discuss the similarities and differences
between IKEA and Haglöfs’ market entry process into the Japanese market.
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2. Theory
This section will present a review of the earlier literature, which is used for our analysis of IKEA
and Haglöfs’ network market entry into Japan. It will also present how and why our choice of
model will be utilized in analyzing the two companies.
2.1 Earlier literature review
Earlier literature review regarding foreign market entry (FME) can generally be separated into
two different approaches. The first approach tends to generalize decision making and potential
problems in foreign market entries (Hill & Hult 2015: 377; Johansson & Thelander 2009). This
approach sees the FME process mainly as a decision problem, where implementation is
secondary. It is a strategic, normative approach were the top management is making the
decisions. The decisions include which market to enter, the timing, the scale of the entry,
strategic commitments as well as the mode of entry. These are mostly decided by the amount of
risk the company is willing to take (Hill & Hult 2015: 377). The entry strategy is thus derived
from these decisions and based on rational choice, for example cost-consciousness (Madhok
1997). This approach is regarded as a unilateral FME process, meaning that the entering firm is
considered the only actor, while other actors in the process are perceived as passive (Blankenburg
1995).
The second approach, on the other hand, is more descriptive and seeks to define the entire
process development of foreign market entries (Blankenburg 1995). The entry process is an
interactive and largely unpredictable development in which the firm acts on events and adjusts its
performances during the process (Kinch 1991: Lee 1991 in Blankenburg 1995). It sees the firm as
multilateral where the firm must interact with different actors in its network, both internally and
externally. The entry process is done in sequential steps as the firm adapts, understands and gains
new knowledge regarding its network relationships. The entry process is thus a dynamic process
where capabilities are the basis for competing (Madhok 1997). The interaction with other actors
in the network affects the firm either in a positive or negative way. These relationships are then
also directly or indirectly affected, either negatively or positively, by other relationships. With
secondary functions being as important or sometimes even more important than the primary ones
(Anderson 1994). It is therefore highly individual and different on a firm to firm basis, further
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supported by Granovetter (1992 in Anderson 1994 pg. 13) when he cautions against abstracting
analyzed firms out of their context.
One of the earlier theories conceptualizing the internationalizing process through the network
process is the renowned Uppsala model (Johanson & Vahlne 1977). The model has been the go-
to model regarding market entries for the last couple of decades. The Uppsala Model sees
internationalization as a step-by-step process where the firm gradually enters and slowly builds
more knowledge before continuing to the next market. A firm will frequently enter markets that
are culturally close to the home market, most often based on psychic distance, and continue from
there. Furthermore, the Uppsala model was revised in 2009 to include new business practices.
The revised model includes viewing business environments as relationships that are intertwined
in a network-like structure (Johansson & Vahlne 2009). There have been attempts to further
expand upon the Uppsala Model. Figueira-de-Lemos et al. (2011) presents a new perspective of
how risk level change based on uncertainty and commitment. Similar additions were presented by
Hadjikhani et al. (2014), were they added the new elements expectation and unknown uncertainty
and examined their implication in the model.
There are other studies of firms that contradict the Uppsala Model’s take on slow, gradual
internationalization. These firms rapidly expand into foreign markets after their inception,
successfully competing against bigger and established firms earning them the name Born
Globals. These firms, however, are often small to medium sized. Andersson & Wiktor (2003)
point to human resources, with entrepreneurs being singled out, as an important part in these
firm’s ability to expand rapidly to foreign markets. These entrepreneurs had international
knowledge and experience gained from, either individually or in a combination of, possessing
informal networks, working abroad or studying abroad (Andersson & Wiktor 2003).
The aforementioned studies in this approach both stressed the importance of knowledge as a
means of success during foreign market entries. Further, the revised Uppsala Model and Born
Globals, despite their different view on the internationalization process, still regards networking
as an important aspect of a foreign market entry. The study by Blankenburg (1995) incorporates
and rely heavily on networking as a means of success. She noted that earlier literature rarely
highlighted the problems surrounding the implementation of an FME, concentrating instead on
strategic and normative issues. The decisions were considered the most important part of the
FME, not the implementation surrounding said decision. The entering firm’s actions are
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considered unilateral, with passive unidentifiable customers. Blankenburg (1995), on the other
hand, takes a more descriptive approach by considering the FMEs as a process of development
where the interaction between the network actors are the main drive force. The entry is done in
sequential steps where the development is interactive and unpredictable. The firm can readjust its
performance and act on events during the entire process, building up market knowledge during
every step of the process. The firm also have both direct and indirect relationships, with some
indirect ones’ being hard to discover, particularly before an entry since the company lack market
knowledge, but also throughout the entire entry. The market knowledge benefits the creation of a
multilateral network where direct and indirect actors are identified during the entry process. Such
actors contribute, or hinder, the market entry process of a firm making their identification key to
the success of an entry. We can, by utilizing this model, achieve a more complex understanding
of a market entry process. This includes knowledge of relationships, general market knowledge
as well as how they are obtained and how these affect an entry process.
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2.2 The Blankenburg model
Figure 1. Different factors affecting the entry force and consequently the FME (Blankenburg 1995:387).
The Blankenburg process is affected by the three factors time, number of active actors and
focal firm’s activity. The time factor implies that the FME process is an on-going process and
usually spread over a long period of time. Number of active actors affects the firm from the
interactions between actors both externally and internally, these interactions can be either positive
or negative for the firm. Focal firm’s activity is all the decisions and actions that actors from
within the firm made during the process. The internal and external entry forces, in turn, affect
these three factors. The external entry force is defined as the cumulative forces that drive the
entry process forward and is derived from external factors in relation to the entering firm. These
factors are labeled as degree of conflicting interests, activeness, structuring, visibility and degree
of internationalization. The internal entry force is defined as the cumulative forces that drive the
entry process forward and is derived from factors inside the firm. These factors are labeled as
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network knowledge, ambitions and interests, connected relationships, and network
internationalization (Blankenburg 1995). If not otherwise stated, all material in chapter 2.2 will
be from Blankenburg (1995).
2.2.1 External entry force
The degree of conflicting interest is the relation of interests with the external network actors
and the firm. A high degree of conflicting interests might originate from time consuming
government bureaucracy. A low degree will provide the firm with important resources, such as
critical information about the foreign market. Governments, suppliers, customers and competitors
are all examples of outside external actors.
Visibility assumes that the more visible a firm is, the higher the chance that actions of the actors
in the foreign market will be directed toward that firm. There is a higher chance that a highly
visible firm will have actions taken towards it than a firm with low visibility. Depending on the
goals of the actors, the actions taken can either hinder or aid the targeted firm. More visibility can
thus either strengthen or weaken the external entry force.
The activeness of the external actors affects the degree of the previous entry forces as well as
visibility. For example; the more active domestic firms are in their interactions the more visible it
becomes for an entering firm. Hence, an actor’s activeness (or lack thereof) will increase or
decrease the entry force.
The structuring of a foreign market network might impede entries. There are two sides on this
spectrum: loosely and tightly structured networks. Loosely structured are easier for foreign
companies to enter, but difficulties with identifying and coordinating with important counterparts
could make it a lengthy process. Tightly structured networks, on the other hand, are seemingly
impossible to enter unless some of the network actors have an interest in the entry. If there is an
interest, however, the entry is presumed to proceed smoothly since changes are incorporated
more efficiently than in loose networks.
A high degree of internationalization for a foreign country network means that domestic actors
are more likely to have direct relationships with actors from other countries. This means that a
firm might be known to the domestic market from actions taken in other foreign countries, even
before they enter the internationalized country. Similarly, a low degree will result in that
domestic actors are less likely to have direct relationships with actors from other countries.
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2.2.2 Internal entry force
Any network knowledge before an actual market entry can only be regarded as superficial where
network knowledge can only be fully obtained when the firm has entered a market. When the
firm has a presence and is acting within a network, firms can see how relationships and networks
are fully connected. Some networks and relationships are easily recognized, while others must be
provoked by the entering actor. By provoking other actors, it can force them to interact with other
actors and thereby expose non-visible relationships. The individual actors that are within the firm
usually possess this network knowledge. These actors may also have a history of activities which
links them back to current, old, or inactive relationships of importance.
Ambitions and interest is regarded as vital for the firms FME process. It is important that
internal actors have the same ideas and interests’ concerning the firm’s continued development
process. Existing differences will lead to variations in ambitions and interests among the
employees, making these actors within the firm strive toward different goals. This, consequently,
affects the FME process negatively. It is therefore important that the firm have employees that
are in line with and understand the firm’s ambitions and interest regarding the FME process.
Blankenburg (1995:385) describes the importance as “the interest among the actors within the
firm may be crucial for the intensity and the kind of actions that are performed and such interests
are likely to reflect the degree of perseverance and the zeal for step-by-step learning during the
process.”
During the FME process the firm will interact with actors who are connected to other actors in so
called connected relationships. Every interaction with one actor means a link to another actor,
which creates connected relationships during the FME process. Having a relationship with one
actor may provide beneficial opportunities, paving the way for new relationships with new actors
and networks.
Network internationalization: A firm’s internationalization degree, or the number of employees
with experience in international relationships, can prove essential as they can use earlier
relationships and knowledge in new market entries and networks. This also creates experience
and perseverance in the firm toward establishing and entering new and unique network
relationships in new markets.
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2.2.3 Application of theory
To analyze the chain of events regarding IKEA and Haglöfs’ market entry into Japan, an
analytical model that can study a process is required. Consequently, the Blankenburg theory that
regards a firm’s entry into a foreign market as a process was chosen. The theory states that
entering a new market is dependent on several factors, and that the factors themselves are
affected by, and not independent from, one another. The decision made by the firms during the
entry can then be analyzed in the context of being affected by decisions made by other actors in
the network.
The external factors will be applied and analyzed as following:
Conflicting interest will help us analyze the external actors’ degree of interference towards
IKEA and Haglöfs during their market entry into Japan. The activeness factor will allow us to
analyze to what degree the external actor’s activities on the market hindered or helped the market
entries. network structure will be used to analyze how connected external actors are to one
another on the Japanese market and how this affected the two firms. The visibility factor will
allow us to analyze how well-known IKEA and Haglöfs were on the Japanese market upon
entering, and how this affected their entry. Lastly, the internationalization factor will allow us
to analyze the degree of internationalization of the actors in Japan, and in turn how this affected
IKEA and Haglöfs. These factors will subsequently affect the external entry force.
The internal factors will be applied and analyzed as following:
The network knowledge factor will allow us to analyze the internal market knowledge that
IKEA and Haglöfs possess of Japan, and in turn how this knowledge affected both firms’ entries.
The ambitions and interest factor will help determine how aligned the ideas and interests from
the internal actors of IKEA and Haglöfs were upon entering the Japanese market and how this
affected the firms. The connected relationships factor will help us analyze how relationships
that already existed within IKEA and Haglöfs aided the entry into the Japanese network. Lastly,
the network internationalization factor will allow us to analyze both firms’ previous
internationalization degree and how this influenced their market entry. These factors will
subsequently affect the internal entry force.
The internal and the external forces will affect the three factors time, number of active actors and
focal firm’s activity. These factors, affected by the internal and external forces, will be used to
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highlight and discuss the similarities and the differences of the two firms’ market entry in our
conclusion.
2.2.4 Critique
The Blankenburg model cannot analyze everything and is missing, for example, current
economic environment and cultural differences. Furthermore, Uzama (2009) notes that no models
have been developed for market entries into a Confucian society such as Japan. With that said,
however, the model can be used to analyze the different factors governing the entry, such as
events and network relations, to gain an understanding of the establishing process of the two
firms.
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3. Method
The following chapter will highlight which methods have been used for the thesis, choice of
companies as well as discuss the primary and secondary data used.
3.1 Choice of companies
We wanted to investigate market entries into the Japanese market with this thesis. The companies
chosen did not have any requirements other than being of Swedish origin, having entered the
Japanese market, being of different sizes and having different experience from previous market
entries. But to realize this, the companies also had to be chosen based on if they could provide
relevant data. Magnus Nervé, Area Manager for Asia/Pacific at Haglöfs, was willing to
contribute his experience from Haglöfs entry. He was also a previous employee at IKEA during
their entry and had relevant information regarding their entry into the Japanese market.
Furthermore, IKEA had entered several markets amassing considerable experience before
entering the Japanese market. Haglöfs, on the other hand, had only entered a couple of European
countries in comparison. IKEA, being the bigger company, possessing more resources than
Haglöfs to be employed during a foreign market entry. Both these companies fulfilled the given
criteria and were thus chosen.
3.2 Qualitative study
The purpose of this study is to investigate, analyze and discuss the difference between IKEA’s
and Haglöfs’ market entry process into the Japanese market. The study is retroactive, focusing on
the processes both firms had during their establishment on the market.
The explorative nature of this study resulted in a qualitative interview reflecting the need for
more in-depth answers from the participant. Qualitative is to be used when there is a need for the
participant to explain or build on responses (Saunders et al. 2009:323). IKEA and Haglöfs’ entry
is studied chronologically from initiation to the end of the market entry.
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3.3 Case study
A case study is used for situations where a contemporary phenomenon is studied with several
sources of evidence. A case study is also able to create a rich understanding of the context of the
research and process used, and is also good for generating answers for why, what and how
questions (Saunders et al. 2009:146). This essay also employs primary and secondary data, both
of which can be used within the scope of a case study. In this study, the phenomenon is the
difficulty for outsiders to enter the Japan market. Hopefully, choosing two companies enabled a
broader, more accurate portrayal of the market entries than if only one was to be used; revealing
more variables of the entry. There is information about both companies’ entry situations, creating
an opportunity to compare the two and discover which of them were more successful during the
different steps of the internationalization. The foreign entry process is an ongoing process, and it
is difficult to pinpoint where it begins and where it ends. We have decided, though, that the time
horizon for IKEA is from the decision to enter in 2002 until the opening of the first store in 2006.
And for Haglöfs this period is from 2011 and 2 years into their entry.
3.4 Primary & secondary data
3.4.1 Primary data
We have chosen to collect primary data by interviewing a representative from IKEA and Haglöfs.
Primary data is data that has been collected for the first time and for the purpose of this study
(Jacobsen 2002: Saunders et al. 2009). According to Saunders et al. (2009) qualitative interviews
are used to find and understand a phenomenon related to the research question. The choice of a
qualitative approach is thus based on gaining a deeper insight into the market entry process. The
interview questions have been created in a semi-structured way, using an interview guide
(Appendix 1). A semi-structured approach allows for flexibility and follow-up questions as well
as the ability for us to change the order of the questions as we see fit, this allows for more
knowledge to be extracted from the interviews (Saunders et al. 2009). Since semi-structured
interviews are changeable and allow for discussion by the person being interviewed we have
opted to collect the data gained by our interviews using audio-recordings.
We initially got in communication with IKEA and Haglöfs’ representatives through email and
have made sure that our interviewee possesses the relevant knowledge for our study. By doing
this we confirm, at least to a certain degree, that the answers we have received can be viewed as
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valid and relevant to the purpose of this study. The interview was conducted through Skype due
to the interviewee not being based in Sweden. As we did not get the chance to physically meet
our interviewee we could not observe and interpret their reaction to our questions. Also, in some
cases the interviewee may be less willing to engage in a deeper discussion when the interview is
not done physically. However, this was somewhat mitigated by the fact that a video call was
used. These factors may lead to less reliability (Saunders et al. 2009). However, as a physical
interview would be impossible due to the long distance, this was the only appropriate approach.
This has been done by contacting and explaining the background and purpose of the study to the
interviewee before the interview. In doing this we strengthened the credibility of our study
(Saunders et al. 2009).
This thesis uses only one interviewee to provide empirical data about both companies, which
could result in a biased view. We are aware of the problems that can arise from this and have
used secondary data to confirm what have been stated whenever possible. Using both primary
and secondary data whenever possible can support and complement the research, giving the study
more reliability (Jacobsen 2002). However, since IKEA is more renowned around the world in
comparison to Haglöfs, we have found more information regarding IKEA. However, as our
interviewee was among the responsible for the Japanese market entry we believe that we still
have enough information about Haglöfs to make the comparison.
Lastly, Saunders et al. (2009) state that reliability of the study is of high importance when doing
qualitative studies where, depending on different circumstances, the reliability of our studies can
be affected by how participants answer our questions. Example of circumstances that may affect
the person being interviewed is the interview environment, where they might not want to give
certain answers in public (Saunders et al 2009). We have tried to avoid this by allowing the
interviewee to decide the time for the interview and preferred environment. Another aspect that
can affect our reliability is how we ask our questions, which may lead the interviewee to answer
in a certain way or make them defensive. We have formulated and asked the questions in a
manner that will help mitigate this problem. Firstly, the questions have been designed to study a
network perspective and specific factor, but without being too specific, and allowing the
interviewee to provide an answer they see fit but still within the scope. Secondly, the questions
have been asked in a neutral tone, as to make the interviewee comfortable with the questions and
not feel overwhelmed or at unease.
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3.4.2 Secondary data research
This study also uses secondary data. Secondary data is information that someone else has
collected or created in another context (Saunders et al. 2009). The secondary data was collected
to complement and extend our empirical data. The thesis’ secondary data includes collecting,
reading and processing news articles, business journals, reports as well as previous studies. This
secondary data was collected through databases, webpages, libraries as well as business
information from firm’s websites. Searches in databases have included some of the following
keywords: Internationalization process, network internationalization, Japan internationalization,
Swedish market entry Japan, Haglöfs Japan, IKEA Japan.
3.5 Theory operationalization
Our interview questions have been shaped in accordance with Blankenburg’s network approach.
The questions were inspired by reviewing the interview guide of Blankenburg in her studies from
1995 as well as an earlier thesis that used the Blankenburg Model (Blankenburg 1995: Månsson
& Persson 1999). However, Blankenburg’s interview guide incorporated a qualitative and
quantitative, based on statements and not questions, approach and it was therefore important that
we reformulated the questions to take a qualitative approach.
We have limited ourselves to only do a qualitative thesis, as previously stated, and have not used
the quantitative part of Blankenburg’s statements. Opting instead to remake these statements into
to questions. We do believe, however, that the answers we get will be just as reliable and valid
without the quantitative part, as the questions will allow for deeper reflection and discussion.
Even though the questions have been operationalized to connect it with our theoretical model we
have avoided using terminology that may confuse or mislead the interviewee. The questions have
been adapted to fit someone without academic background. It is important that the interviewee
understands the inquiries, or else the questions might be misunderstood, and the given answers
will be irrelevant. However, an effect of having a qualitative semi-structured approach where the
interviewee can answer somewhat freely to the questions asked is that some questions are
answered before they are asked. Some questions in the interview guide have therefore not been
asked during the interview. The appendix will clarify which questions have been asked and which
have not.
The statements were redesigned to questions that capture the aspects of internal and external
entry forces, such as the factors, and in turn the foreign market entry process for IKEA and
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Haglöfs. External entry force aspects include questions related to conflicts of interests,
activeness, network structure, visibility and degree of internalization. The internal aspects have
questions related to network knowledge, ambitions and interests, connected relationships and
network internalization. The questions were asked in Swedish, but with an English translation in
the appendix.
An example of a statement is: Competitors on the given market have a negative view of our
market entry. Remade to: What was the competitor’s view of your entry?
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4. Empirical review
This chapter will describe our empirical data that has been collected. It describes both IKEA and
Haglöfs’ market entry process and what factors, actors and important events that have affected
the entry process. This is done chronologically when possible.
4.1 Japan
"Japanese consumers are in the process of embracing the concept of value.” (Bloomberg 2006).
The Japanese population have had a reputation of being quality conscious, where the general
population view high prices equal to high quality. However, the country had a shift towards
becoming more cost-conscious and understanding that value exists in lower priced products as
well. According to business analysts, a decade of deflation and rise of discount retailers in Japan
helped changed the general view of the population (Bloomberg 2006).
Japan has a low degree of internationalization, with both its companies and workers
unaccustomed to international firms (interview, Nervé 2016). Between 2011 and 2015
international trade as percentage of GDP was 39 % for Japan (World Bank 2016). Making
Japan’s trade with foreign countries less common than, for example, Sweden with an 85% trade
to GDP ratio. Other European nations also have a higher share of trade as percentage of GDP
than Japan (World Bank 2016).
There are numerous permits needed for purchasing land in Japan, and to do so, the areas where
firms build their stores need to be categorized as a commercial area. If, for example, the area
where a company wanted to build a store on was categorized as a residential or industrial zone
they would need to apply to the city council to change it to a commercial zone. To receive
building permits and get approvals on a number of things, network connections with the
concerned authorities are needed (interview, Nervé 2016).
4.2 IKEA
IKEA was created 1943 in Småland, Sweden by Ingvar Kamprad and sell furniture and home
furnishing products (IKEA 2016; Jetro 2015). The company follows a franchising structure with
328 stores in 28 countries and 155,000 employees. Furthermore, the company includes sales
offices, distribution centers and production factories across the globe, making the company active
in more than 48 countries (IKEA 2016). The company had already done an unsuccessful attempt
17
at entering the Japanese market in 1977 through a quasi-franchising agreement with a Japanese
furnishing seller that would run the IKEA stores in Japan (Interview, Nervé 2016). Ingvar
Kamprad even stated that the Japanese had no need for IKEA at that time and exited the market
shortly after entering it. In 2002 they decided to retry again and opened the first two stores during
2006 (interview, Nervé 2016). Since then, IKEA have opened eight stores and plan to have 14
stores by 2020 (Jetro 2015).
4.2.1 Entry process
Since Japan is the world’s second biggest consumer market as well as third-biggest home
furnishings market, IKEA’s global board decided on conducting market research on the
feasibility of a possible entry (interview, Nervé 2016). Extensive market research was done in
Japan during the years prior 2002 to decide whether there was a demand for their products in the
Japan. The research included the small size of a Japanese home, who the inhabitants of said
homes are (families, singles, age et cetera) and how much time they spent there. Following this
research, IKEA realized they had relevant know-how as they already operated in markets that had
the same living environments, such as New York, Paris and London (Jetro 2015). IKEA’s global
board finally concluded that there was a business opportunity and subsequently opened the
company’s Japanese branch in 2002 (interview, Nervé 2016)
Complementing IKEA’s market research was their experience from previous market entries
(interview Nervé 2016; Jetro 2015). Since IKEA is an international company, and had entered
several countries before Japan, there are manuals/standard procedures for most of the establishing
process in a foreign market. These include, for example, how to approach purchasing land, layout
of the stores, testing of all IKEA products and dealing with regulations and approvals from
governmental authorities. There are manuals for most almost everything that IKEA needs
approved by regulatory authorities in foreign markets, and this was utilized during and after 2002
to prepare for the first store in 2006. The manuals/standard procedures also include how to hire
the 500 workers between 2002 and 2006. Half of its initial personnel of 10 had expert knowledge
the firm needed, such as logistics management experience from earlier market entries, to simplify
the entry. The other half of the initial workforce was hired because of Japanese market
knowledge and/or had an extensive network in the country (interview, Nervé 2016). IKEA had,
consequently, a basic understanding of possible problems that could arise and how to mitigate
those based on previous market entry experiences. Also, IKEA develops their employees on all
levels to share values that are in line with IKEA. Peter List, IKEA Japans President & CEO
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describes this in an interview “So, really, it’s about developing our coworkers and their
competence within the company. If you want to do something, it’s not about your education or
qualifications; it’s about your passion and your interest in life at home, and your interest to grow
and develop. That is what we believe in for all our coworkers.” (Japan Today 2015).
There are numerous permits needed for purchasing land in Japan, and to do so, the areas where
they build the stores need to be categorized as a commercial area. If, for example, the area IKEA
wanted to build a store on was categorized as a residential or industrial zone they would need to
apply to the city council to change it to a commercial zone. Furthermore, there were other issues
that were prevalent only in Japan, such as special regulations on product certification and
labeling, as well as restrictions on the importation of food products for the IKEA restaurants
(interview, Nervé 2016; Jetro 2015; Japan Today 2016). To receive building permits and get
approvals on the previously mentioned issues, network connections with the concerned
authorities are needed (Interview, Nervé 2016; Jetro 2015; Japan Today 2016). Peter List
describes these relationships as the only way to overcome the bureaucracy (Japan Today 2016).
4.2.2 IKEA in Japan
IKEA was already known among many of the consumers that had read about or visited IKEA
abroad and was wanted by the municipalities (Interview Nervé 2016; Jetro 2015). This is also
exemplified by their grand opening ceremony which attracted approximately 35,000 people
(Bloomberg 2006). The municipalities were interested in their entry for three reasons; firstly, an
IKEA store in their area would increase employment directly and indirectly, both of which are
positive for the municipalities. Secondly, bringing IKEA to the municipality would increase the
politicians’ popularity among the electorate, since there was a demand for IKEA among the
population. Thirdly, the female governor of Chiba, where the first store is located, gave the
company her support since IKEA promised to make life easier for women and stimulate family
life (SvD 2007). The Japanese family life is seen as somewhat disconnected, where men and
women spend relatively low time together, with lower than 20% of men arriving home to their
families by 6 PM. One of IKEA’s goals was therefore to influence the Japanese to spend more
time with their family by making their home cozier, which was also well-received by former
prime minister Junichiro Koizumi. The idea was that by creating the opportunity for the Japanese
to spending more time at home with their families could spur an increase in childbirth to
compensate for Japan’s aging population (ibid).
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Before opening the store in 2006, IKEA wanted to convince the consumers that they understood
the unique Japanese demand. For example: “IKEA transformed a gingko tree-lined boulevard in
Tokyo's trendy shopping district of Aoyama into an open-air museum. Fifteen box-like structures,
each the size of a typical Japanese room, are fitted out with Ikea furnishings. The display is part
of the company's effort to convince Japanese consumers it understands small-scale living.”
(Bloomberg 2006).
There were similar chains already operating in Japan such as Nitori, Japan’s biggest furniture and
home furnishing chain, which were initially uneasy with IKEA’s entry (Forbes 2010: Interview,
Nervé 2016). Another chain, Tokyo Interior, described the quality of IKEA’s products to media
as only lasting for a few years and aimed towards the low-end market (Japan Times 2006). The
company’s CEO noted that only they, who knew the Japanese lifestyle, could satisfy Japanese
customers (Japan Times 2006). There were a few actors that actively tried to hinder their market
entry. In hindsight, however, Nitori admitted that IKEA’s entry is the best thing that had
happened to them with increased sales in the Japanese market (interview, Nervé 2016). Lastly,
IKEA Japan’s former CEO Tommy Kullberg stated in an interview that his team enjoyed the
competition because “the more people talk about furniture, the more we sell” (Japan Times
2006).
One hinder, though, was the neighbors to the new IKEA store citing, among others, constructing
noise and heavy, congested traffic. IKEA’s employees made sure to personally communicate
their intentions to these neighbors as an important gesture to show humility (SvD 2007). Showing
humility toward the Japanese population and other actors has been described as important for
IKEA as this helps to create good relationships (SvD 2007; Jetro 2015). Another example is
when IKEA decided to postpone their construction of the first store because 5000 rare birds were
breeding on the site. Disturbing them would have given IKEA a bad reputation, but since they
delayed construction for 3 months they generated positive PR throughout the country (SvD
2007).
Though the municipalities themselves were eager for IKEA to enter, their time-consuming
processes were another hinder to the entry (Interview, Nervé 2016; Jetro 2015). IKEA also had
difficulties hiring Japanese workers with English proficiency, making it a bottleneck for its
Japanese operations. Internally, IKEA had few hinders to the Japanese market entry process with
a positive attitude across the firm toward it. The only internal disagreement to appear was
between the Japanese branch and the main office about whether IKEA should localize their
products to the Japanese market (interview, Nervé 2016).
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What makes the Japanese market unique for IKEA is how the customers are used to, among other
things, higher customer service – much more so than European or U.S. customers. As an
example: If an IKEA package is missing a screw, European customers would be told to return the
next day to receive new ones’, while this would be unacceptable for Japanese customers. In
Japan, IKEA employee will be sent out to deliver the missing screw and apologize for the error
made and for the time wasted assembling the item only to find out a screw was absent (interview
Nervé 2016). The expectations from consumers that demand higher quality and service, in
comparison with previous company experience, made the Japanese market more difficult to enter
(interview Nervé 2016; Jetro 2015).
Business relationships are also not too visible in Japan because of its risk averse business culture.
IKEA made business proposals to companies but got declined without understanding why, but
this was because Japanese firms already had long term relationships. Japanese companies tend to
prefer long, and safe business relationships based on trust rather than create new, even if the new
deal is more promising. IKEA had problems observing these relationships because they are based
more on relationships than on profit driven business (interview, Nervé 2016).
4.3 Haglöfs
Haglöfs is a Swedish company developing and selling outdoor goods including clothing,
footwear and hardware (Haglöfs 2016a). The company was started in 1914. Haglöfs is currently
active in 25 markets in Europe and Asia, with approximately 200 employees (Haglöfs 2016b).
Haglöfs was bought by the Japanese sporting goods company Asics in 2010, with the head office
still in Sweden (interview, Nervé 2016).
The first real international expansion for Haglöfs started in 1998 when they entered their
neighboring Nordic countries. Starting with subsidiaries in Finland, then in Norway and lastly in
Denmark. After that Haglöfs entered the Central European market in 2003 starting with Germany
(Interview Nervé 2016: Haglöfs 2016a). Haglöfs first came in contact with the Japanese market
in 1998 when they started exporting some of their products through an agent (interview, Nervé
2016). However, this process was considered a full “hands off” process where direct contact with
the market did not exist; the agent would make orders and Haglöfs would ship it. After having
physical presence in the Nordic and parts of the European market, they decided in 2010 that the
next step would be to enter the Japanese and South Korean markets. To gain full control of their
operations Haglöfs themselves started subsidiaries in the two countries during 2011. Haglöfs
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entry into South Korea and Japan was the first market entries outside of Europe (interview, Nervé
2016).
4.3.1 The entry process
The decisions to enter the Japanese market was made by the board of directors in 2010. Haglöfs
generated a business plan involving a five-year strategy for entering the Asian market, where
Japan was included, starting from 2011. The strategy outlined the goals of how many customers,
stores and employees they required as well as each year’s financial targets (interview, Nervé
2016).
Haglöfs as a company did not have any previous direct experience of the Japanese market, but
they did initially gain indirect experience through reports from their distributors. The reports
included information regarding clients, end-customers as well as market data. However, these
reports were described as presenting general facts about the Japanese outdoor market (interview,
Nervé 2016).
Haglöfs first step toward entering Japan was to employ Magnus Nervé as country manager based
on his previous experience from IKEA. The previous experiences include managing the process
of a foreign market entry into Japan, such as business enquiries, legal issues and general country
knowledge. These experiences were then used to provide less friction during the Japanese market
entry. The initial difficulties for Haglöfs was coming in contact with important customers who
would be willing to sell the company’s products, as well as deal with cultural and business
differences between Japan and Europe (interview, Nervé 2016).
4.3.2 Haglöfs in Japan
“We have learnt a lot from our expansion in Europe and our financial resources. The new
possibilities offered by Asics buyout will provide us with a direct entry into new markets via our
own company.” Nicolas Warchalowski, former CEO of Haglöfs (Fashionmag 2011).
As the company was preparing to enter the Asian market in 2010, Asics, a Japanese sporting
goods company, acquired Haglöfs. Haglöfs introduction to the market was aided by Asics already
existing network, introducing new potential clients and relevant network actors, such as real-
estate firms that could sell or lease stores to Haglöfs. Furthermore, Haglöfs gained network
knowledge by hiring executives with Japanese market experience and relationships, for example
having hired a sales executive from Nike Japan (interview, Nervé 2016).
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General business climate in Japan is considered as very strict with delays being unacceptable.
Magnus Nervé contrasts this to Europe where such aspects are viewed as less strict in
comparison. Thus, Nervé emphasizes the importance of hiring the right employees during the
entry process, giving someone with relevant connections as described above, or local Japanese
employees with business knowledge as examples. These employees would deal with day-to-day
business aspects such as interacting with local clients. When dealing with Japanese personnel,
clients will feel more understood, in contrast with international personnel that does not
understand Japanese business culture. Haglöfs, subsequently, prioritized hiring Japanese
personality. This is best described by the following quote from Magnus Nervé explaining a
customer’s concern; “Say Haglöfs send us 20 jackets, and there is a problem with 5 of them. Will
Haglöfs understand that we want to return them or not?” (Interview, Nervé 2016). As such,
adapting to the domestic market is considered very important for foreign firms entering Japan.
Apart from the high number of competitors in the Japanese outdoor market, the general market-
network structure is described as generally open for new firms to enter without major difficulties.
Haglöfs have positioned themselves on the market as being a Nordic outdoor brand with quality
products. Relationships among and between actors such as competitors were easily identified for
Haglöfs when entering. This openness is specifically prevalent on the outdoor niche business-to-
consumer market, which Haglöfs operates in. Nervé contrast it to entering the industrial market
of Japan, where there might be more difficulties that exist, as that market is led by closely knit
networks, making it difficult to enter (interview, Nervé 2016).
In comparison to other markets, the Japanese still only accounts for a small amount of Haglöfs
sales. However, the Japanese market is considered a hub for the rest of the Asian market in
designer and general clothing trends. Furthermore, the Japanese outdoor product market is still
growing, while the European market growth is minimal, forcing firms to take market shares from
each other. The Japanese market is therefore seen as an important to future company growth
(interview, Nervé 2016).
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5. Analysis
In this section we seek to analyze and compare the internal as well as external factors from
Blankenburg (1995) that have affected the entry process for IKEA and Haglöfs.
5.1 External forces:
5.1.2 Degree of conflicting interests
IKEA’s degree of conflicting interests was low to medium during its entries, where regulation,
bureaucracy and complaints from surrounding neighbors regarding its stores are the most notable
conflicting interests. Nitori was, at the time of the entry, the biggest furniture and home
furnishing company in Japan and thus IKEA’s biggest competitor. Another competitor was
Tokyo Interior who tried to spread an image of IKEA’s furniture as being of low quality in
comparison to theirs. Although none of the companies hindered IKEA’s entry to any significant
degree. Furthermore, IKEA entered at the right time since the population had started to realize
that value existed in lower price products. This meant that the consumers were supportive of their
entry and in turn created a lower degree of conflicting interest. Also, the government itself did
not actively seek to hinder its market entry process, but government regulation and bureaucracy
was considered a hinder. Particularly the decision processes are slow on the municipalities side
because of heavy bureaucracy. The prime minister was supportive of their entry because IKEA
wanted to increase family time at home. The female governor of Chiba was also supportive since
IKEA promised to make life easier for women by stimulating family life. The external entry
process was weakened Because of bureaucracy, although it was somewhat, but not fully, offset
by the support IKEA enjoyed.
Haglöfs degree of conflicting interest was low to medium as they did not have any actors that
actively tried to hinder their market entry process. Yet, they received help into the market through
being acquired by Asics. Asics actively helped them with business connections and relevant
market knowledge making the entrance relatively easier. Furthermore, the outdoor market in
Japan had many competitors, however this did not create any conflicting interest as the market
was still growing. A growing market allows for leeway for new brands to enter without the
market becoming overcrowded, which can cause firms to outrival each other and in turn cause a
higher degree of conflict. In sum, the low degree of conflicting interest strengthened their
external market entry.
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5.1.1 Activeness
For IKEA, actors in Japan were easy to discern because of their activeness, most of the
consumers were, for example, eager for them to enter since they had heard about and visited the
stores abroad., IKEA did, consequently, not have difficulties with the consumers when they
entered Japan, if anything the consumers’ enthusiasm for IKEA helped their market entry.
Secondly, another actor that was enthusiastic about the entry was the municipalities, as IKEA
would increase employment and economic activity. Thirdly, politicians were also interested in
their entry since this would boost their popularity among the electorate. The high activity among
the consumers made it easy for IKEA to discern a demand for them from the consumers. Also,
willing municipalities and politicians were highly active and thus easily seen, which made it
easier to choose a construction site for the stores.
For Haglöfs, the activeness of the actors in the network was low for most part, with the notable
exception of Asics who actively helped Haglöfs. All other actors, irrespectively of whether they
were aware of Haglöfs entry or not, had a low activeness in their actions toward the company.
This includes competitors, retailers, customers and governments. The actor’s low activeness most
probably originated from their disinterest as Haglöfs was a small company entering among
hundreds of others. Haglöfs also had troubles identifying actors willing to buy their products
since there were none, or few, who actively showed interest. Activeness among the external
actors are thus deemed to be high for IKEA and low for Haglöfs.
5.1.2 Network structure
The Japanese market structure is seen as a tightly structured network which should make the
entry of a new actor difficult, mostly attributed to fact that Japanese firms value long term
business relationships. However, IKEA’s external entry force was not noticeably weakened since
the firm was wanted by most actors.
The case was a bit different for Haglöfs. The business to consumer outdoor market in which they
operate in is described as a loosely structured network, mainly because of the high number of
competitors. If there is a demand for the product retailers will buy them. The biggest obstacle is
then to persuade retail companies to buy Haglöfs products and prove there is a demand for it.
Accordingly, Haglöfs positioned itself as a high quality and, presumably because it is considered
exotic in japan, Nordic brand. Overall, though, the company did not face much obstacles with the
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Japanese structured network, but that was mostly through the aid of Asics’ network and contacts
throughout the market.
5.1.3 Visibility
IKEAs degree of visibility was high, given its record of earlier internationalizations, which
increased the actions taken toward the company. There were some actions that tried to hinder
IKEA’s entry, such as when a competitor tried to degrade IKEA’s products in the media.
However, since most visible actors in Japan wanted to bring IKEA to the country the actions
taken were generally positive; aiding their entry. Additionally, actions that showed humility
during their entry also increased IKEA’s visibility, such as letting the rare birds breed before
constructing the store. IKEAs personnel personally also visited the neighbors around the new
stores to listen to their concerns. Another factor that aided their visibility was IKEA’s eagerness
to show their understanding of the unique Japanese demand. These factors have increased their
visibility in the Japanese market and the high visibility is believed to have strengthened the firm’s
external entry process.
The visibility degree of Haglöfs was low because the firm was relatively unknown on the market.
This means that there was a smaller chance that actions would be taken toward them, either
helping or hindering actions, by other actors in the network during the entry process. However,
Haglöfs tried to further their visibility by establishing their own brand stores in the country. This
strengthened their entry force as they went in without much resistance from other actors while
receiving help from Asics.
5.1.4 Degree of internationalization
The degree of internationalization is low for most of the actors in Japan. This could be attributed
to Japan’s trade to GDP is relatively low in comparison with European nations, where Japanese
businesses have less contact with foreign companies than the average Swedish firm. However,
IKEA was not affected by the low degree of internationalization on the market.
The low degree of internationalization is also exemplified in Haglöfs dealing with actors such as
local clients preferring to interact in day-to-day business aspects with other Japanese natives.
Since they know what they can expect from them, local clients felt more understood and
comfortable in dealing with other Japanese companies. This made Haglöfs entry a bit more
difficult. Asics involvement, however, is believed to have decreased the effect of this.
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5.1.5 Summarizing external differences
IKEA had to deal with more government regulations than Haglöfs and thus a higher degree of
conflicting interest. However, most actors supported IKEA’s entry, such as both populace and
politicians, since it would increase economic activity in their region. Haglöfs, meanwhile, only
had the support of Asics. Haglöfs also faced less bureaucracy issues than IKEA mainly since
IKEA had to receive more approvals regarding products, stores, and building permits, among
other things. Furthermore, IKEA was well known amongst the Japanese and can thus be
concluded to have had a high visibility in the market. Haglöfs, on the other hand, was mostly
unknown. The result was that IKEA had actions taken towards it that aided its entry, while
Haglöfs’ visibility was low and had little to no actions, aiding or hindering, taken toward it. Also,
the activeness of the actors in IKEA’s network, in example being wanted by the consumers and
the politicians, contributed to strengthen the entry force of the company and offset some of the
negative impacts of the complicated bureaucracy. Japan does have a low degree of
internationalization, but IKEA was still known before their entry while Haglöfs was not. This is
the result of the different sizes and how renown the two companies were, which meant that even
though Japan, in general, are not too internationalized they are familiar with big international
firms. The market network structure is generally seen as tight in Japan, making it difficult to
enter the network unless the actors in the network want a particular company there. As previously
mentioned, the populace and politicians were actors who wanted IKEA, while Haglöfs had its
owner Asics as support. However, looking at Haglöfs, the outdoor market is described as loosely
structured due to the high number of competitors with low entry and exit barriers. IKEA, on the
other hand, faced a more closed network structure but was able to enter successfully due to the
will of the network actors. IKEA had, overall, a higher external entry force.
5.2 Internal forces
5.2.1 Network knowledge
In the Blankenburg model, network knowledge is only truly attained from being active on the
market and cannot be perfectly mastered before then. A way to increase it artificially is to hire
staff that already possess domestic knowledge and utilize their old network relationships in the
market. This is what IKEA did since half of their initial workforce of 10 was hired because of
their network knowledge. The first person to be hired, Tommy Kullberg, was notably there
because of his extensive network relationships with Japanese authorities and knowledge about the
27
Japanese market. By using these individuals IKEA could also hasten the future acquisition of
network knowledge in the Japanese market.
When entering the Japanese market, Haglöfs did not have any relevant network knowledge.
However, they received superficial market knowledge through their communications with agents.
To gain direct market knowledge internally, they also hired a few employees with relevant
network knowledge to aid their entry process, such as Magnus Nervé with his experience from
IKEA’s earlier market entry. Also, as Haglöfs was acquired by Asics they gained network
knowledge internally through that relationship, providing Haglöfs with network knowledge that
aided their FME process.
5.2.2 Ambitions and interest
IKEA’s global board made the decision to enter Japan. The decision was described as positive
across the firm, with all employees understanding and being in line with the goals of entering
Japan. This is also prevalent as IKEA sees the importance of aligning passion and interests across
the firm by developing the IKEA mindset for all their coworkers. IKEA’s entry was thus easier
since there were few conflicting ambitions and interests within the firm. One notable difference
in ambitions, however, was if and to what degree IKEA should localize to the Japanese market.
They opted to do so, making IKEA stores in Japan one of their most localized in the world.
The decision to enter the Japanese market for Haglöfs was also taken by the board of directors.
This decision was positively received across the firm. Although there were periods when the firm
had to learn and adapt to new regulations, they strived and worked internally towards the market
entry. Their aligned ambitions and interest can be related to Haglöfs being a small firm and an
internal excitement to expand to new foreign markets. Haglöfs internal ambitions and interest
were therefore mostly aligned.
5.2.3 Connected relationships
IKEA made notable contacts with government officials as explained in the network knowledge
part, where the hired staff provided relevant connected relationships. These connections helped
IKEA deal with building permits and receive approval on several applications. Also, this enabled
important network relationships and knowledge to be transferred from the employees to the
company. The connected relationships provided by the staff were of importance for enabling a
quicker market entry process for the company.
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Haglöfs connected relationships was based on Asics and experienced newly hired employees.
Asics introduced Haglöfs to potential clients and other actors on the market, with their
relationship proving beneficial for Haglöfs in acquiring new clients. Haglöfs saw the importance
of hiring employees with relevant connections as this could help the firm acquire new clients as
well as new important relationships. The hiring of Magnus Nervé, experienced from the IKEA
entry, provided connected relationships from the previous entry. Asics and the hired employee’s
market relationships and knowledge were, over time, transferred to Haglöfs. The relationships
and knowledge provided were vital for an easier market entry.
5.2.4 Network internationalization
IKEA have entered several countries with different cultures before Japan and possessed relevant
internationalization experience. Their network internationalization degree was therefore high,
with experience from previous market entries being used with, for example, having operated in
countries with similarly small living spaces as Japan. There is also the fact that all their previous
experience has led the company to develop back office manuals and standard procedures on how
to handle market entries. Which basically encompass all aspects of the entry, from purchasing
land and dealing with regulations to the layout of the store. Moreover, IKEA hired employees
with extensive market and network knowledge to provide a smoother entry.
Haglöfs internal network internationalization degree is seen as relatively low. Before entering the
Asian market, all operations were based in the Nordic countries and Europe. They did not have a
back office with relevant knowledge, nor did they have many employees with experience from
earlier entries similar to the Japanese market. This is part of the reason for hiring external experts
with knowledge about the Japanese market. However, Haglöfs was assisted by Asics knowledge
about the Japanese market. Haglöfs learned step-by-step how to deal with the Japanese business
climate, with a jump start from Asics and the hired employees’ market knowledge.
5.2.5 Summarizing internal differences
Both firms had prior network knowledge before entering Japan, with IKEA conducting thorough
market research and Haglöfs having received market data from its agent in Japan. Though both
are deemed to be superficial, according to the Blankenburg Model, it was a necessary step in
order to prepare for the entry. Both companies hired actors with knowledge about the country’s
market network. These had old contacts and relationships considered to be of value to the
company and its entry process. Half out of IKEA’s initial workforce of 10 were there only
29
because of their market knowledge or networks, while Haglöfs hired two; one employee from the
previous IKEA entry and a Sales manager from Nike Japan. One of the differences is believed to
be derived from the two companies scope of entry, Haglöfs’ entry was much smaller and required
less manpower, while IKEA had much more at stake. Furthermore, Haglöfs with its significantly
lower number of employees is assumed as having an easier time streamlining ambitions and
interests across the firm. However, both IKEA and Haglöfs had positive ambitions and interests
which aided their process. This could be due to the fact that IKEA, with the help of their selective
hiring and the continuous development of their employees, aimed to create company-wide
ambitions and interests. Haglöfs have, regarding connected relationships, used their connections
with Asics as well as making sure to hire a few employees with relevant relationships. IKEA on
the other hand made sure to employ more staff, relative to Haglöfs, with important connections,
partially because the firm had a lot more invested in Japan and that they did not already have a
connection with a Japanese firm. This resulted in that IKEA relied on their connected employees
to produce meaningful relationships while Haglöfs could use both Asics and the few connected
employees they had. The differences between the two is considered to be big, as IKEA’s
connected employees produced an impressive result in a more difficult scenario mostly caused by
the Japanese bureaucracy. Lastly, this was Haglöfs’ first market entry outside of Europe, whereas
IKEA had operated on several markets across the globe. IKEA had, thus, a higher network
internationalization degree than Haglöfs based on the previous market entries. A tangible
comparison between the two can be seen in IKEA’s back-office manuals and procedures that
guides everything from purchasing land to handle government regulations, something which
Haglöfs lacked. IKEA had, in other words, a higher internal entry force than Haglöfs.
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6. Conclusion
This section will help conclude our thesis statement: to investigate, analyze and discuss the
differences and similarities between IKEAs and Haglöfs’ market entry process into the Japanese
market.
6.1 Summarizing conclusion
We observed the differences between Haglöfs and IKEA’s market entry using Blankenburg’s
external and internal factors in the analysis. Summarizing the differences between the two firms
in relation to time, number of active actors and focal firm's activity we see the following
results: IKEA had a longer process for entering the Japanese market spread over a longer period
of time; it took them four years for the first store to open. Haglöfs entry had been shorter, as they
decided to enter in 2010, and operated on the market in 2011. However, the definition of entering
a new market is different for both firms. IKEA’s entry means opening a brand-new store, while
Haglöfs entry refers to operating through different sales channels as well as smaller stores. When
looking at the number of active actors there have been more actors that IKEA has had to deal
with both internally and externally. This is previously discussed and is mainly the result of that
IKEA is larger in terms of employees as well as internationalization degree, among other things.
Firstly, comparing the two firm’s focal firm’s activity, IKEA had to deal with more decision-
making and action-taking in their internationalization process. Again, this is because their larger
corporation. Secondly. IKEA had to deal with more bureaucracy in comparison to Haglöfs.
Thirdly, IKEA was more prepared for the entry, having entered several countries with varied
business cultures. Haglöfs, on the other hand, possessed no back-office manuals and procedures
and had to rely heavily on Asics and their employees with network knowledge.
The main differences between both firms in their entry process have thus been their sizes and
history. IKEA’s entry, which had many big hurdles caused by its size and product regulations,
was destined to be longer than that of Haglöfs’. The furniture giant offset this somewhat with its
back-end structures, employees with relevant connections, international experience and the
backing of external actors such as politicians and the populace. These have been the differential
factors between IKEA and Haglöfs’ entry. The main similarities between both firms have been
their use of connected relationships, were both firms used externally hired employees. There have
been a lot more differences than similarities between the two firms, were IKEA had a stronger
31
internal and external entry force than Haglöfs’ that aided its FME process - decreasing the
amount of time needed to successfully enter.
6.2 Further studies
The study can be further expanded using more companies to create a more comprehensive
understanding of entries into the Japanese market. Furthermore, studies can be done to investigate
one of the internal or external factors more closely and its influence on a firm's FME process.
Lastly, the same study can be done on two different sized firms but incorporate other theories
such as psychic distance, were a deeper understanding of entering foreign markets with different
cultures could be reached. This could then be applied on a study of big and small firms to observe
how different firm sizes are affected by different cultures, and whether it aids an FME or not.
32
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7.1 Interviews
Nervé, Magnus. Area Manager Asia/Pacific at Haglöfs AB, Hong Kong, April 27, 2016, Haglöfs,
Uppsala/Hong Kong, Skype Interview.
36
Appendix 1
The first part of the appendix is an English translation of the questions while the second part is
the Swedish original.
English - Question Guidelines
General Questions
We explained the thesis statement and the purpose of this study before the interview.
Do you wish to be anonymous?
Do you wish for the companies to be anonymous?
Is it okay if we record this?
• Presentation of the interviewee and its role in the company. What responsibilities/what
role did you have in the companies (IKEA and Haglöfs) entry in Japan?
• What year did you start doing business in Japan? Tell us about the process that entailed
the decision. What did you know of the market before the entry process began? What
preparations were made?
• From who did the initiative to start the entry come from? Which people within the
company were of importance during the entry? Other actors of importance for
IKEA/Haglöfs?
• Did you have any connections of importance in Japan before entry? Which external actors
have had an importance for the entry and in what way? What connections have the
company had with these?
• Who were the leading external actors (which also included a definition of external
actors)? What have their role been in the entry? How have they affected the entry?
Hinder? Have the external actors actively tried to help or hinder IKEA/Haglöfs- entry
process?
• Have important actors outside the company been open and cooperating or have there been
difficulties to establish a position in the market?
• Do you think important actors in the Japanese market was hard to detect?
37
• What experience do the Japanese actors have of international business? Have this affected
the company’s entry?
• Have there been a change in an actor’s position during your entry process? Have any of
these actors or authorities appeared as more important than you first believed after a while
of being in contact and doing business on the market?
• Tell us about IKEA/Haglöfs’ entry process. How has the entry process proceeded? Have
the entry process changed and in that case why? What have the greatest difficulties been
during the entry process?
• What distinguishes the Japanese market? What have been the greatest difficulties with the
Japanese market? What possibilities were there?
• What was the company’s own strength? Has earlier international activity within
IKEA/Haglöfs affected the entry?
• What new business opportunities have arisen from the entry? In what way?
• Have new actors and relationships been created during the entry?
• How important has your earlier experience from the Japanese market been at IKEA? How
important has your earlier experience from IKEA been at Haglöf?
Questions regarding the External Entry Force
The degree of conflict between external and internal interests
• What was the competitor’s view of your entry?
• What was potential customers’ view of your entry?
The firm’s degree of visibility for external actors
• How well known was IKEA/Haglöfs at the time of the entry?
• How was the attention from the potential suppliers at the time of the entry?
• How well known were you among the customers at the time of the entry?
Degree of external actors activity
• How did your competitors react at your actions in the market? (Did they open a new store,
began to sell new products etc.?)
• How was the activity among the customers and suppliers at the time of the entry? Did it
increase/decrease?
38
Degree of structure in the foreign network
• How was the market overview, is it easy/hard to see business relationships? Is the
relationships between suppliers and customers long- or short-term? Why? Are
relationships based on tradition?
• How was it to make business in Japan? What did the customers/competitors think of a
new actor? (I.e. what did they think of possible threat to existing business relationships?)
Degree of Internationalization of the foreign network
• How did you perceive Japanese authorities (how was their experience of foreign
companies)?
• How was the supplier's attitude towards you in contrast with domestic firms? Do they
prefer domestic/foreign companies?
• What is Japanese customer’s view of foreign companies
Questions regarding the Internal Entry Force
• What conflicts where there within the firm towards the entry? What was the biggest
obstacle regarding the entry?
• What was, internally within the firm, the reason behind your success (if there is one)?
Degree of network knowledge
• What insight did you have within the company about the Japanese market and customers
at the time of the entry?
Degree of Ambitions, interests and ideas within the company
• How important was the Japanese market entry for the company?
• How was the company affected by the market entry?
• How big was the interest within the company regarding the entry?
Connected relationships
• Did you receive any help in the market? How/why?
• Did earlier connected relationships help? How?
Degree of network internationalization
39
• How many earlier market entries had been done before entering Japan? How did that
experience help you in the entry?
Swedish Questions
Generella frågor
Vi förklarar syftet och problemformuleringen med uppsatsen före intervjun.
Vill du vara anonym?
Vill du att företagen är anonyma?
Vi kommer att spela in detta, går det bra?
• Presentation av respondenten och dennes roll i företaget. Vilket ansvar/vilken roll har ni
haft i företagets (IKEA och Haglöfs) etablering i japan?
• Vilket år började ni göra affärer med Japan? Berätta om processen som föregick beslutet.
Vad kände ni till om marknaden innan etableringen påbörjades? Vilka förberedelser
gjordes?
• Från vem kom initiativet till etableringen? Vilka personer inom företaget har haft
betydelse för etableringen? Andra aktörer av betydelse inom Haglöfs/IKEA’s koncernen?
• Hade ni några tidigare kontakter i japan av betydelse som påverkade etableringen? Vilka
externa aktörer har haft betydelse för etableringen och på vilka sätt? Vilka kopplingar har
funnits till dessa?
• Vilka är era främsta externa aktörer (definiera externa aktörerna)? Vad har dessa haft för
roll i etableringen på marknaden? Hur har dessa påverkat etableringen? Hinder? Har de
externa aktörerna aktivt försökt driva på eller hindra IKEA/Haglöfsatt etablera sig på
marknaden?
• Har viktiga aktörer utom företaget varit öppna och samarbetsvilliga eller var det svårt att
etablera en position på marknaden?
• Upplever ni att aktörer av betydelse på den japanska marknaden är svåridentifierade?
• Vilken erfarenhet upplever ni att japanska aktörer har av internationella affärer? Vad har
detta betytt för företagets etablering?
40
• Har någon omdefiniering av någon aktörs position skett under resans gång? Har någon
aktör eller instans framstått som mera viktig är vad ni först trodde efter att ha varit i
kontakt med och verkat på marknaden under en tid?
• Berätta om IKEAs etableringsprocess. Hur har etableringsprocessen fortgått? Har
etableringsformen förändrats och i så fall varför? Vilka har de största svårigheterna vid
etableringen varit?
• Vad utmärker den japanska marknaden? Vilka är de största svårigheterna med den
japanska marknaden? Vilka möjligheter finns?
• Vilka är företagets egna styrkor vid etableringen? Har tidigare internationell verksamhet
inom IKEA/Haglöfs haft betydelse för etableringen?
• Vilka nya affärsmöjligheter har etableringen gett? På vilket sätt?
• Har nya aktörer och relationer genererats under resans gång?
• Hur viktig har din erfarenhet från IKEA varit för Haglöfs?
Frågor angående externa inträdesfaktorer
Graden av konflikt mellan externa och interna intressen
• Hur var konkurrenterna inställda till ert inträde?
• Hur var de potentiella kunderna inställda till ert inträde?
Företagets grad av synlighet för externa aktörer
• Hur välkänt var IKEA/Haglöf vid marknadsinträdet?
• Hur var uppmärksamheten från de tänkbara leverantörerna vid inträdesförsöket?
• Hur var kundernas kännedom om er vid inträdet?
Grad av externa aktörers aktivitet
• Hur reagerade era konkurrenter på era gärningar/handlingar på marknaden? (Öppnade de
en ny butik, började sälja ny produkt etc.?)
• Hur var det med aktiviteten bland kunderna och leverantörerna vid inträdet? Ökade den
och varför?
Struktureringsgrad hos det utländska nätverket
41
• Hur är marknadensöverblicken, alltså är det lätt/svårt att se affärsrelationerna? Är
affärsrelationen mellan leverantörer och kunder lång eller kortsiktiga? Varför? Är den
traditionsbunden?
• Hur var det att försöka göra affärer i Japan? Vad tyckte kunderna/leverantörerna om en ny
aktör (tex. Tyckte de att nuvarande affärsrelationer äventyrades)?
Internationaliseringsgrad av det utländska nätverket
• Hur uppfattade ni japanska myndigheterna (hur var deras erfarenhet med utländska
företag)?
• Hur var leverantörernas attityd mot er gentemot inhemska företag? Föredrar de
inhemska/utländska företag?
• Vad är japanska konsumenternas förhållningssätt gentemot utländska företag?
Frågor angående interna inträdesfaktorer
• Vilka motstridigheter fanns inom företaget gentemot marknadsinträdet? Vart fanns det
största hindret mot inträdet?
• Vad var, inom företaget, orsaken bakom er framgång(om det nu fanns någon sådan)?
Graden av kunskap om det externa nätverket
• Vilken insikt hade ni inom företaget om japanska marknaden och kunderna vid inträdet?
Graden av amibtioner, intressen och ideer i företaget
• Hur viktig var satsningen för företaget på den japanska marknaden?
• Hur påverkades företaget internt av marknadsinträdet?
• Hur stort var intresset inom företaget gällande inträdet?
Kopplade relationer
42
• Fick ni hjälp in på marknaden? Hur/varför?
• Hjälpte era tidigare förbindelser/relationer inträdet? Hur?
Internationaliseringsgraden i företagets nätverk
• Hur många tidigare marknadsinträden hade företaget gjort innan Japan? Hur hjälpte den
erfarenheten vid inträdet?